Baby Boomers Surpass Millennials in Buying Homes

A typical home buyer story is simple: a couple wants to raise a family, and renting isn’t cutting it. With that in mind, you might speculate that millennials would be snatching up the most homes. But that’s not the case. According to recent National Association of Realtors (NAR) research, the largest generation of home buyers isn’t the millennials.

It’s the baby boomers.

With an increase from 29% over the year prior, 2023 research showed baby boomers dominated with 39% of the home buyer market share. Why is this happening, and what does it mean for the millennial generation?

Baby boomers own more market share

The data from the 2023 Home Buyers and Sellers Generational Trends Report saw two things happen at the same time:

• The combined market share of younger boomers (58-67 years old) and old boomers (68-76 years old) buying homes rose to 39% in 2022, up from 29% in 2021.
• The combined share of younger millennials (24-32) and older millennials (33-42) declined from 43% in 2021 to 28% in 2022.

In other words, a combined drastic increase in baby boomers buying homes and a just-as-dramatic decrease in millennials buying homes made a radical shift in home buyer demographics in just one year.

Retirement buying puts boomers back in play

The reasons why boomers overtook millennials are several-fold. For starters, look at why baby boomers are buying more homes. If the median baby boomer is about 67 years old, then many baby boomers are reaching retirement age. In fact, from now until 2030, around 10,000 baby boomers will turn 65 each day. All baby boomers will be over 65 by 2029.

Retirement age can be a time to move for health, family, or wealth reasons or to downsize a home for easier maintenance as the retirees age in place. This puts baby boomers back in the housing market.

But that still doesn’t explain the dip in millennials buying homes. After all, most millennials are approaching their 40s, which typically means having more available capital to put towards a house. And they are making enough money, as the report points out. Older millennials ($102,900) had the highest median household income of any generation outside of Generation X ($114,300).

So they have the money, but why aren’t they buying up any homes? The report doesn’t suggest a reason, but since 2022 was a year of rising interest rates and inflation, some conjectured that many millennials who bought homes were content to stay with their current mortgage. Meanwhile, baby boomers beginning retirement had more incentives to downsize, potentially putting more baby boomers in the market.

Where Are the Millennials Buying Homes?

Even if the age data doesn’t tell us what millennials are doing, maybe the maps have something to say.

In February 2023, Lending Tree published a list of the most popular metro areas for millennials to buy homes. Here’s what they found:

1. San Jose, CA, saw 63% of its mortgages offered to millennials

2. Denver, CO (61%)

3. Boston, MA (60%)

San Jose’s numbers appeared to be driven by the Silicon Valley job market. Although the average down payment among millennials was over $144,000 there, it was much smaller in Denver and Boston, at about $74,000 and $84,000, respectively.

On the other side, the article highlighted the least popular places for millennials to acquire mortgages:

1. Las Vegas, NV (41%)

2. Birmingham, AL (45%)

3. Phoenix, AZ (46%)

After all, these areas had very low down payment amounts averaged among millennials. For example, the average down payment among millennials in Las Vegas was around $49,000.

This data suggests millennials may make more homebuying decisions based on job opportunities. For baby boomers, that’s not as strong a consideration. If anything, baby boomers can make decisions based on where they want to retire, such as living near family or moving to a warmer climate.

Another factor? According to Bankrate, which pointed out some generational differences, millennials also struggle to save money. Around 27% of younger millennials say that the most challenging thing about homebuying is saving up for a down payment. Part of that is many carrying high student loans that take decades to pay off.

About 25% reported that they had to rely on gifts from family or friends to help with house purchases.

And as millennials struggle to pay down their debt and save money to buy, houses keep appreciating. Some 44% of millennials said the high prices of homes were the reason they keep renting.

Trend may continue through 2023

This suggests that baby boomers continue to have the upper hand when it comes to saving for real estate. Millennials are sometimes reluctant home buyers. While they may have the income stream, with older millennials having the second-highest household income of all the age groups in the study, baby boomer gifts to their millennial children are still crucial for the savings-deficient group to make a down payment.

High prices for homes may also be to blame. Recent inflation and climbing mortgage interest rates could keep the demographic trends in place for 2023. Baby boomers may continue to change homes and constitute a large part of the homebuying market, while millennials save and wait their turn. With older millennials already earning enough money to afford a home, it suggests there’s more to the homebuying equation than simply having the income. They’re also waiting for economic conditions to make saving up for a down payment easier.